Euro-area inflation accelerated for the first time in 11 months in August as rising energy costs threatened to exacerbate the economic slump.
Consumer prices in the 17-nation currency bloc increased 2.6 percent from a year earlier, the European Union’s statistics office in Luxembourg said today, matching an initial estimate on Aug. 31. Core inflation, excluding energy costs, slowed to 1.5 percent from 1.7 percent. Employment was unchanged in the second quarter after a 0.3 percent drop in the previous three months, a separate report showed.
Crude-oil prices rose to the highest in four months today, approaching $100 a barrel, and the surge in recent months has pushed up costs for consumers and companies. While the European Central Bank raised its inflation forecasts this month, ECB President Mario Draghi unveiled a plan to buy unlimited quantities of short-dated government bonds of nations receiving emergency bailouts to tame the region’s debt turmoil.
“Energy prices are the only thing responsible for the temporary stop in a trend of decreasing inflation rates,” Jens Kramer, an economist at NordLB in Hanover, Germany, said before the data were released. “The euro-zone economy is very weak and from that point of view we will have no danger that demand- triggered inflation risks will occur.”
Consumer prices in the currency bloc rose 0.4 percent in August from the previous month, today’s report showed. The biggest upward impact on the annual inflation rate was from transport fuels, followed by heating oil and gas. While oil prices have increased about 26 percent from their 2012 low on June 28, a deepening economic slump has left companies with less room to pass on higher costs. Euro-area producer-price inflation held at a 2 1/2-year low in July.
The ECB kept its benchmark interest rate at a record low of 0.75 percent on Sept. 6 as it forecast a deeper economic contraction for 2012 than it did three months earlier. Euro-area gross domestic product will drop 0.4 percent this year instead of 0.1 percent forecast previously, it said. At the same time, the ECB raised its projection for inflation next year to 1.9 percent from 1.6 percent. The central bank aims to keep inflation just below 2 percent.
Draghi, who called inflation risks “broadly balanced” in the medium term, said the ECB’s bond-buying plan would involve purchasing short-dated government debt on the secondary market of countries that ask Europe’s bailout fund to buy their debt on the primary market. Neither Spain nor Italy has made such a request.
Euro-area finance ministers are discussing aprogram for Spain at a meeting today in Nicosia, Cyprus. They will be joined by their colleagues from the 10 non-euro EU countries as well as the region’s central bankers this afternoon.
In the 27-nation EU, inflation accelerated to 2.7 percent in August from 2.5 percent in July. Consumer-price growth slowed in four member states, remained stable in two and quickened in 20, the statistics office said.
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